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Citrix will announce its acquisition of XenSource tomorrow, The Register has learned.

In a bid to expand its software management play, Citrix will grab the developer of the open source Xen hypervisor. The deal will give XenSource heftier corporate backing needed to compete against VMware. Meanwhile, Citrix will be able to expand its own virtual desktop effort revealed in April and its flagship software streaming service.

Industry chatter has the acquisition price running as high as $500m, although that sounds pretty insane to us. XenSource has failed to take much of the virtualization market despite its strong ties to both the Linux and Windows camps. As we understand it, the deal was meant to be announced on Monday but last minute squabbles forced the parties to keep negotiating.

Neither company has responded to calls seeking comment.

Last week, analysts at Credit Suisse issued a report detailing reasons why Citrix's purchase of XenSource would make sense. You can find the report here.

XenSource has just rolled out Version 4.0 of its flagship product, adding a number of VMware-like tools.